US Q3 GDP in focus

Asian markets mostly traded lower on Thursday, as investors tended to take less risk ahead of US Q3 GDP date to be released on Friday evening. The third quarter US GDP will reveal a clearer picture of the world’s largest economy and hint at the timing of the Federal Reserve’s next rate hike.

The market anticipates 2.5% GDP growth, according to a Thomson Reuter’s poll. This is an optimistic estimate given lackluster economic growth (0.5%-1.2%) in the last three quarters. Some analysts believe that US GDP looks to have rebounded as the second quarter real GDP growth came in surprisingly below expectation. That expectation has led to a higher expectation of a Dec rate hike and led the dollar index to a three-month high.

The S&P 500 index has traded in a well-defined technical range between 2,106-2,178 points over the last two months. Upside is limited by the current high valuation (over 20 times trailing P/E) whereas the downside is cushioned by solid corporate earnings. The market has found itself in a fragile balance, which could be broken by unexpected economic data or the upcoming election results.

US SPX 500 - Cash

OCBC Q3 profit rises 5%, beating estimates

Singapore’s second largest lender OCBC posted better-than-expected third quarter earnings, which is fueled by a 25% increase in its non-interest income and profit from life assurance. The group’s net profit rose 5% y-o-y to S$943 million, despite lower net interest income. OCBC set aside a higher allowance of S$166 million for loans and other assets, anticipating a more challenging environment for the oil & gas sectors. The company’s non-performing loans climbed up to 1.2%, from 0%.
Yet better earnings result failed to lift its share price. OCBC closed flat and the benchmark Straits Times Index was little moved on Thursday. This probably indicates that investors are still concerned about potential higher impairment charges for loans to the struggling oil & gas industry and slowdown in China. The other two banks, UOB and DBS will announce their earnings on Friday and the following Monday respectively.

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